Treasury Secretary Tim Geithner and Secretary of Education Arne Duncan met Thursday with a group of Washington, D.C., students, parents and educators at Woodrow Wilson Senior High School to discuss initiatives the Obama Administration has undertaken to help make a college education more affordable, highlighting the American Opportunity Tax Credit (AOTC), according to a release from the Treasury Department’s Office of Public Affairs.
“America’s prosperity depends on the economic policies we pursue to strengthen our nation’s competitiveness,” Geithner told the town hall-style crowd. “And the strength and competitiveness of our nation will depend largely on continuing to have the best educated students in the world.”
According to the two policymakers, the AOTC gives parents and students a tax credit of up to $2,500 for college expenses. The two claim the credit can give millions of Americans a leg up in financing a college education, as a recent Treasury Department analysis found up to 9.4 million families with college students will benefit from the credit this year. The same analysis concluded the AOTC will provide $18.2 billion in tax relief this year, with families expected to receive an average credit of $1,900.
“We cannot underestimate the impact of the American Opportunity Tax Credit on 9.4 million students nationwide,” said Duncan, the former CEO of the Chicago Public Schools.
The AOTC, which began as a part of the American Recovery and Reinvestment Act (ARRA), better known as the stimulus bill, was extended by the Obama Administration by two more years as a part of Congress’ year-end tax cut package signed by President Obama in December. The credit replaces a previous college relief break, the Hope credit, for the years 2009 and 2010, and will now remain in place through 2012. Students claiming the full break for all four years can receive a total credit of up to $10,000 to finance their higher education, which would cover 80 percent of tuition and fees at the nation’s average two-year school, or about 33 percent of tuition and fees at an average public four-year institution, according to Treasury Department figures.
The Treasury Department’s analysis finds the AOTC improves on the Hope credit by providing a larger break for nearly all students to whom it applies, covering all four years of college, rather than just two, and applying to text books, as well, which the Hope break did not. Further, the AOTC is partially refundable, meaning families with no federal income tax liability can receive the credit as well. Such families will receive roughly $4 billion in refunds this year, according to the Treasury’s analysis, titled “The American Opportunity Tax Credit: Making College More Affordable for Students and Their Families.”
In Thursday’s meeting, Geithner and Duncan also focused on other college-affordability measures the Obama Administration has tackled, such as working to simplify the Free Application for Federal Student Aid (FAFSA), and broadening and increasing the value of Pell grants, the main source of federal aid for low-income students.
In a blog post authored by the two lawmakers posted on the Treasury Department’s website, both emphasized the exploding cost of higher education, the widening divide between the rich and poor in the U.S. and steps the president and his cabinet have taken to put college within reach for lower-income families.
“We’re pushing to make this tax credit permanent so that college students and their families can know with certainty that they can get up to $10,000 over four years of college,” they wrote. “Fifteen years ago, America’s young adults were more likely to earn a college degree than in any other country. Today, young adults in the U.S. are tied for ninth in the world in college attainment.”
The two also touted the financial benefits of earning a bachelor’s degree.
“On average, college graduates with a bachelor’s degree earn nearly twice as much over the course of their lifetime as workers with only a high school diploma. And the unemployment rate for college graduates with a bachelor’s degree (about five percent) is currently about half that of all workers.”
“The United States has a long way to go before it lives up to the promise of education as a great equalizer,” Geithner and Duncan concluded. “But to achieve that quintessential American promise, college must be within reach for hard-working families who want their children to pursue higher education to prepare for a globally competitive job market.”
Sam Butterfield can be reached at [email protected].
